Insurance fraud might sound like someone else’s problem, but if you’re a homeowner in Florida, it’s hitting you directly in your wallet. Fraudulent claims and dishonest practices have played a major role in driving up the cost of home insurance, making it tougher to find affordable coverage. Let’s break down how insurance fraud affects everyone’s premiums and what’s being done to fight back.
What Is Insurance Fraud & Why Should You Care?
Insurance fraud is any act committed to deceive an insurer to gain an undeserved payout. This might include exaggerated claims, faking damage, or colluding with dishonest contractors. While it may seem harmless, these dishonest acts force insurers to pay out more money, which in turn raises premiums for everyone.
There are two main types of fraud: hard fraud (where someone deliberately fakes an incident, like staging a theft or damaging property to collect insurance money) and soft fraud (where a person exaggerates the extent of legitimate damage to increase a payout). Both types cost insurers – and you – a significant amount each year.
The Hidden Costs of Fraud: How It Drives Up Your Insurance Premiums
When insurers face more fraudulent claims, honest homeowners like you end up paying higher premiums. Over the past few years, fraud has been one of the main reasons why Florida home insurance costs have skyrocketed. Even if you've never filed a claim, you're still footing the bill for this problem.
According to the Coalition Against Insurance Fraud, insurance fraud costs the U.S. economy billions of dollars every year. And Florida, unfortunately, has been a hotspot for these activities. The state’s unique mix of tropical weather patterns, particularly frequent hurricanes and flooding, has created numerous opportunities for unscrupulous individuals to file fraudulent claims or inflate legitimate ones.
How Fraud Impacts Florida’s Insurance Market
Florida has been especially vulnerable to fraudulent practices, from inflated roofing claims to Assignment of Benefits (AOB) abuse. Up until 2023, unethical contractors took advantage of AOBs, allowing them to take over your claim, inflate repair costs, and engage insurers in costly litigation lacking merit. Many of these lawsuits are still working their way through the legal system.
These costs are among the reasons many national insurers have either restricted the types of policies they sell in Florida or pulled out of the marketplace altogether – leaving fewer options and higher costs for you. In turn, this is part of why we’re seeing so many homeowners relying on Citizens, the state-run “insurer of last resort,” which itself is trying to offload their risks’ by mandating policies be moved into the private marketplace.
Insurers who stay in Florida are often forced to pass these increased costs down to policyholders, which is why your premiums keep creeping up. In the end, fraud contributes to a vicious cycle: higher costs leading to more homeowners seeking lower-cost options, which sometimes results in cutting corners or opting for coverage without adequate protection.
What’s Being Done to Combat Fraud?
The good news is Florida has been cracking down on insurance fraud. Recent legislation has made it harder for fraudulent claims to slip through, and law enforcement is actively pursuing those who engage in these scams. Private insurers, including those operating here in Florida, are also taking steps to detect and prevent fraud themselves, which can help stabilize premiums over time. For example, at Florida Peninsula Insurance Company, we have a Special Investigations Unit (SIU) dedicated to researching suspicious claims, working with the state to prosecute those committing fraud, and collecting restitution when possible.
Statewide regulatory efforts include the elimination of assignment of benefits (AOB) on insurance claims, as of Jan. 1, 2023; promoting consumer education; and employing advanced data analysis to spot suspicious claim patterns. The industry’s push to fight fraud is a step in the right direction – but it requires continued support from homeowners like you to make a lasting impact.
How You Can Help Reduce Fraud (& Your Premiums)
Here’s what you can do:
- Be wary of door-to-door contractors: If a contractor offers to inspect your roof "for free" after a storm and encourages you to sign anything, be cautious. If something feels off, it probably is.
- Know what your policy covers: Understanding your policy can help you spot any discrepancies if a contractor or service provider tries to inflate a claim. Call your agent if you’re unsure about anything in your policy.
- Report suspicious activity: If you suspect fraud, report it. Every instance of fraud you help prevent saves everyone from paying more.
- Work directly with your insurer: When possible, deal directly with your insurance company rather than signing over control to a third party. This ensures you remain in control of your claim and prevents inflated repair costs.
Insurance Fraud Costs Every Florida Homeowner More
Insurance fraud isn’t just a problem for insurers – it’s a problem for all Florida homeowners. By understanding how fraud works and how to spot it, we all can help keep premiums in check. Stay vigilant, ask questions, and don’t be afraid to report suspicious activity. It’s a step we can all take to make home insurance more affordable for everyone.
At Florida Peninsula Insurance Company, we’re here to help homeowners be as prepared as possible for the challenges of living in Florida – whether it’s a hurricane coming or the potential rise in fraudulent activity after one. If you suspect insurance fraud, report it. It’s the best way to help lower home insurance premiums across the board.
If you have any questions about your homeowners policy from us, contact your agent. And if you’re in the market for home insurance, you can get started with a quick and easy online quote on our website.
